28 July 2021 by , , and Competition Law Alert

A pint of trouble: COMESA’S beer manufacturer investigation commences

On 24 June 2021, the Common Market for Eastern and Southern Africa (COMESA) Competition Commission (CCC) announced the commencement of an investigation into potential restrictive and prohibited practices, under Articles 16 and 19 of the COMESA Competition Regulations (Regulations), undertaken or engaged in by several beer manufacturing companies operating in the Common Market.

Article 16 of the Regulations prohibits all agreements which have the object or effect of preventing, restricting or distorting competition in the Common Market, and which may affect trade between member states. Article 19 prohibits agreements or arrangements between competitors which, among others, allocate customers and markets within the Common Market.

The investigation, a first for the CCC in the beer market, will scrutinise practices that allegedly impede cross-border trade by implementing marketing structures that may serve to deny consumers benefits of competition in the alcoholic beverages industry across the region. The CCC noted that the manufacturers may have market allocation arrangements among themselves or territorial restrictions in their distribution agreements with third-party independent distributors. The CCC’s concern is that such market allocation or territorial restrictions reinforce national borders and, in turn, hinder trade between member states, thereby restricting competition in the Common Market.

Drawing on the South African experience, in 2014 a similar investigation into market division and price discrimination in the beer production market was conducted by the Competition Commission (Commission), as outlined in Competition Commission v South African Breweries Limited and Others [2014] 2 CPLR 339 (CAC). Herein, it was alleged that South African Breweries Limited (SAB) and its appointed distributors entered into agreements which prevented the distributors from distributing products other than SAB products, at prices and with distribution discounts different from those offered to independent distributors, thereby lessening competition in contravention of the Competition Act 89 of 1998, as amended (Competition Act). The Competition Appeal Court (CAC) found that the arguments raised by the Commission were insufficient in proving a substantial prevention or lessening of competition (to the detriment of consumers of other distributors or consumers in general). The CAC also noted, among other things, that one of the Commission’s submissions was incorrectly rooted in the assertion that any restraint imposed by a firm goes on to restrain competition. The matter was ultimately dismissed by the CAC.

More recently, albeit in the cement market, the CAC dismissed an appeal by the Commission against an order by the Competition Tribunal finding the first respondent, NPC Cimphor (Pty) Ltd, had not contravened the Competition Act in Competition Commission of South Africa v NPC-Cimpor (Pty) Limited and Others [2020] 2 CPLR 524 (CAC). The CAC found, among other things, that a sufficient case had not been proven linking the first respondent to the alleged market allocation conduct. This emphasises that any finding of prohibited market allocation requires a thorough and well-evidenced investigation.

The CCC specified that the commencement of its investigation in no way presupposes a contravention of the Regulations. We await the findings of the CCC and its approach (more specifically whether or not same will be aligned to that adopted in South Africa) should formal allegation(s) of contravention be supported by the outcome of the investigation.

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